TaxTMI 
TaxTMI 
2025 (6) TMI 988
X X X X Extracts X X X X
X X X X Extracts X X X X
.... entry number 54 of notification number 12/2017-Central Tax (Rate) dated 28 June 2017? 3. Whether charges received @ 3% of the sale value of birds of VRBFL and Venco for the Veterinary services provided by VHPL (SAC 99835) would be exempt from levy of GST as per entry number 46 of notification number 12/2017-Central Tax (Rate) dated 28 June 2017 as Veterinary service? 4. Whether Laboratory testing and analysis undertaken by VHPL to carry out various laboratory analysis and tests in respect of the birds including feed, water etc. in relation to the brooding, growing and laying of birds, should be classified under Service Accounting Code 9986? 5. Whether charges received @ 7% of the sale value of birds of VRBFL and Venco for the Laboratory testing and analysis services provided by VHPL would be exempt from levy of GST as per entry number 54 of notification number 12/2017-Central Tax (Rate) dated 28 June 2017 as agricultural extension services? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a referenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntered into an agreement with M/s Venkateshwara Research and Breeding Farm Limited (hereinafter referred to as "VRBFL') dated 3 February 2003 and with M/s Venco Research and Breeding Farm Limited (hereinafter referred to as 'Venco') dated 5 August 2002 for providing services as listed below- (a) Promote, market and sell birds of VRBFL and Venco as well as handle the sale administration for VRBFL and Venco (referred as "Selling arrangement") (b) Rendering assistance to VRBFL and Venco as well as to customers of VRBFL and Venco in connection with growing the birds including creation of proper hygienic environment, medication, vaccination etc. (referred as "Veterinary services") (c) Carry out various laboratory analysis and tests in respect of the birds including feed, water etc in relation to the brooding, growing and laying of birds (referred to as "Laboratory testing and analysis services") 1.7 For the services rendered as per above, VHPL has been receiving consideration in form of commission as per below from both VRBFL and Venco - - For selling arrangement: Commission @ 10% of the sale value of parents stock, as reduced by returns, rejections, taxes etc - For Veterinar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd tests in respect of the birds including feed, water etc. in relation to the brooding, growing and laying of birds, should be classified under Service Accounting Code 9986? 1.9.5 Whether charges received @ 7% of the sale value of birds of VRBFL and Venco for the Laboratory testing and analysis services provided by VHPL would be exempt from levy of GST as per entry number 54 of notification number 12/2017-Central Tax (Rate) dated 28 June 2017 as agricultural extension services? 2. Statement containing the Applicant's interpretation of law 2.1 The applicant company i.e. Venkateshwara Hatcheries Private Limited ("VHPL") has entered into an agreement with M/s Venkateshwara Research And Breeding Farm Limited ("VRBFL") dated 3 February 2003 and with M/s Venco Research And Breeding Farm Limited ("Venco") dated 5 August 2002 for providing services as listed below - (a) Promote, market and sell birds of VRBFL and Venco as well as handle the sale administration for VRBFL and Venco (referred as "Selling arrangement") (b) Rendering assistance to VRBFL and Venco as well as to customers of VRBFL and Venco in connection with growing the birds including creation of proper hygienic environ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not responsible for bad or doubtful debts. * Other incidental activities or services: a) Feedback on the performance of chicks supplied b) Handling returns, rejections, shortages, mortalities and complaints etc c) Furnish the market intelligence and reports 2.4.2 The applicant puts significant efforts to grab customers for Group companies to enhance their sales volume. Through the applicant's ideas for the prospective clients towards starting up such new line of business, the applicant persistently endeavour to augment the Group companies operation. The existing broiler breeders who are engaged in commercial day-old chick gets pitched by the applicant for backward integration i.e. purchasing parent chicks of new breed from Group companies and then producing day old commercial chicks at their own farms. Factoring and analyzing the size of businesses of target customers, their hatchery farms, background checks, data analysis of past records etc. which are generally considered for acquiring and pitching these prospective clients. 2.4.3 The applicant also provides project reports for forecasting the future opportunities and solutions for business expansion of Group companies'....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the agricultural produce. Copy of the said notification is enclosed herewith. As per the above referred notification, exemption would be available if following conditions are satisfied - a) The service provided is as per service code 9986 b) The service is provided by a commission agent c) The service provided is for sale or purchase of agricultural produce 2.4.9 In our humble submission, the services provided by VHPL to VRBFL and Venco for a commission under Selling arrangement is squarely covered under the ambit of above referred notification, as each of the above three conditions are duly complied with - as discussed herein below - a) The service provided is as per service code 9986 Service code 9986 reads as follows - Heading no. 9986 Support services to agriculture, hunting, forestry, fishing, mining and utilities Group 99861 Support services to agriculture, hunting, forestry and fishing 998611 Support services to crop production 998612 Animal husbandry services 998619 Other support services to agriculture, hunting, forestry and fishing The term "Animal Husbandry" can be understood as the science of farmin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ally. However, section 2 (5) of the CGST Act defines the term "Agent" which includes a commission agent. "Agent" has been defined to mean a person including a factor, broker, commission agent, arhatia, del-credere agent, an auctioneer or any other mercantile agent by whatever name called, who carries on the business of supply or receipt of goods or services on behalf of another. VHPL has been appointed as Commission Agent by VRBFL and Venco to undertake the following activities on behalf of VRBFL and Venco - - Market and promote sale of chicks - Cause or affect sales for and on behalf of VRBFL and Venco - Provide other incidental services such as handling returns, rejections, shortages, mortalities, complaints etc. It is explicitly clear from the terms of the both agreements, that VHPL has been appointed as commission agent for selling products of VRBFL and VENCO. Further, as per section 182 of the Indian Contract Act, 1872, an "agent" is a person act for another, or to represent another in dealings with third person. The person for whom such act is done, or who is so represented, is called the "principal". As delineated in the definition, an agent can be appointed fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al characteristics. Thus, activity undertaken by VHPL as commission agent of VRBFL and VENCO for sale of poultry products, would get covered as sale of agricultural produce to and should get covered under the ambit of notification number12/2017-Central Tax (Rate) dated 28 June 2017. In Lean & Dickson v. Ball (1925] 10 TC 341 where it was held that poultry farming, where poultry derived sustenance to a material extent from the produce of the land, could be regarded as agricultural activity. Thus, poultry products being covered as "agriculture produce", the activity undertaken by VHPL for and on behalf of VRBFL and VENCO would get covered as service provided for sale or purchase of agriculture produce. 2.4.10 Thus having complied with all the three conditions as per above, commission received by VHPL under the selling arrangement should be exempted from levy of GST as per terms of notification number 12/2017-Central Tax (Rate) dated 28 June 2017. 2.4.11 Position under erstwhile Service Tax law Prior to introduction of GST, following was the position under service tax law - For the period prior to 9 July 2004 For the period post 9 July 2004 Vide notification number 13/2003-Serv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by VHPL with effect from 9 July 2004. However, since the definition of "agricultural produce" has been changed in the notification issued under the GST law, which now includes rearing of all life forms (except rearing of horses) - which shall include birds and day-old chicks, VHPL would be entitled to exemption from levy of GST as per terms of notification number 12/2017-Central Tax (Rate) dated 28 June 2017. 2.5 Charges received for Veterinary services 2.5.1 Under Veterinary services, the Veterinary Doctors of VHPL render various Veterinary services to customers of VRBFL and VENCO. The services provided by Veterinary Doctors of VHPL include - * conducting study and recommending appropriate vaccines * Give timely suggestion on de-baking, despurring and detoeing etc * Recommend preventive medication * Provide guidance / suggestion on selecting birds for breeding purposes * Provide diagnostic services, conduct post-mortem examinations and diagnose the disease conditions and monitor the flock, clinical and subclinical infections, suggest line of treatment / prescription etc * Recommend feed formulation and give suggestions about specific formulation, * Give suggestion....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or prevailing disease around the area of their farms. * Providing clinical services to Group companies for detecting the nature of diseases, health concerns and medication with respect to the same. The applicant has separate veterinary section and laboratory section in its health centres where regular vet services are rendered to Group companies and its customers which is different than the advanced laboratory service. * Post-mortem or diagnostic examinations and selecting the appropriate line of treatment. * Nutritional advisory for flock health, growth and disease prevention. These includes farm to farm consultancy due to difference in climatic conditions and availability of nutritional feeds that should be provided for breeding of chicks. 2.5.7 Entry no. 46 of exemption Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017 exempts services under heading 9983 by a veterinary clinic in relation to healthcare of animals or birds. 2.5.8 The term "veterinary clinic" has not been defined anywhere in the impugned notification nor in the CGST law. Hence, the company relies upon the general definition as per medical dictionary, which provides that, "Veterinary clini....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 54 of notification number 12/2017-Central Tax (Rate) dated 28 June 2017, services by way of agricultural extensions services is exempt from levy of GST. 2.6.4 The term "agricultural extension" has been defined at clause 2 (c) of the notification number 12/2017-Central Tax (Rate) dated 28 June 2017 to mean application of scientific research and knowledge to agricultural practices through farmer education or training. 2.6.5 VHPL provides laboratory analysis and testing services which is clearly an application of scientific research and knowledge to agricultural practice (which includes poultry), and therefore should get covered under the terms of exemption notification. 2.6.6 Further, services by way of process which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market is also exempt from levy of GST. The term "agricultural produce" has been defined as - "agricultural produce means any produce out of cultivation of plants and rearing of all life forms of animals - except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Limited having registered office address as Venkateshwara House", S.No.114/A/2, Pune-Sinhagad Road, Pune 411030, have received the aforesaid notice intimating preliminary hearing date, which is scheduled on 22nd Jan, 2020 and also seeking information as per additional requirement mentioned in the said notice. In reply thereto, we state and submit as follows - 1. The Company had two registration under Central Excise law which was (1) AAACV7247HEM004 (Hinjewadi) and (2) AAACV7247HEM003 (Varadade). Registration no. under Service tax was - AAACV7247 HST001. Copy of Central Excise & Service tax registration attached with this application. 2. (a) Classification of goods and their Central Excise Tariff heading a. Vaccine for Veterinary Medicine -30023000 and b. Veterinary Medicine Preparation not for human use -30049085 (b) Rate of Central Excise duty as applicable the rate of Central Excise duty was 2% & 6% - 2012 (As amended from time to time) (c) Details of benefit of notification of Central Excise if any availed no benefit were availed under any notification of Central Excise. 3. (a) Classification of Service/Services as applicable - Company has obtained service tax r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(referred as "Veterinary services") (c) Carry out various laboratory analysis and tests in respect of the birds including feed, water etc in relation to the brooding, growing and laying of birds (referred to as "Laboratory testing and analysis services") For the services rendered as per above, VHPL has been receiving consideration in form of a commission as per below from both VRBFL and Venco- - For selling arrangement: Commission @ 10% of the sale value of parents stock, as reduced by returns, rejections, taxes etc. - For Veterinary services: Charges @ 3% of the sale value of parents stock, as reduced by returns, rejections, taxes etc. - For Laboratory testing and analysis services: Charges @ 7% of the sale value of parents stock, as reduced by returns, rejections, taxes etc. Presently the company has been mentioning following service accounting codes (SAC) on the invoice raised by it - Service SAC used for invoicing Tax Rate Commission charged under the selling arrangement 996111: Services provided for a fee/commission or contract basis on wholesale trade. 18% Veterinary services 99835: Veterinary services. 18% Laboratory testing and analysis services &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any provides pure veterinary services (such as treatment, diagnosis, or medical consultancy for animals) to another company, GST is not applicable. Exceptions: When GST is Applicable If the company also supplies taxable goods (e.g., medicines, pet food, supplements), GST applies to those goods. If the company provides other non-exempt services (e.g., training, grooming, or boarding), GST applies at the applicable rate. If the company acts as a consultant rather than a veterinary service provider, the exemption may not apply. Question 4 :- Whether Laboratory testing and analysis undertaken by VHPL to carry out various laboratory analysis and tests in respect of the birds including feed, water etc. in relation to the brooding, growing and laying of birds, should be classified under Service Accounting Code 9986? Clarification: This office is in opinion that, the laboratory testing and analysis services related to birds, including feed and water, in connection with brooding, growing, and laying of birds, may be classified under Service Accounting Code (SAC) 9986. Explanation: 1. SAC 9986 covers "Agricultural and Animal Husbandry Services", including: Support services....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../farms. e) Forecast and determine sales targets. f) Ensure that existing customers are retained. 2. Causing or effecting sales for and on behalf of VRB a) Procurement of the orders from the new customers as well as the old customers; b) Preparation of proforma invoice for obtaining advance: c) Obtain the advance and deposit in the bank accounts of VRB; d) Intimate VRB about the order and the delivery schedules; e) Arrange for obtaining the delivery from VRB and delivery to the customers and f) Collect the payments. 3. Other incidental activities or services: a) Feedback on the performance of the chicks supplied. b) Handling returns, rejections, shortages, mortalities and complaints; and c) Furnish market intelligence and reports. B) Veterinary Services:- The Veterinary Doctors of the applicant shall render the following services to the customers of VRB :- 1. Brooding/growing/laying:- a) Conduct study and recommend appropriate vaccines depending on the situation and the likely prevailing diseases which may be encountered in their farms/hatcheries. b) Suggestion considering, diseases situation in particular area, appropriate age at which vaccines are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inars and workshop for farmers. c) Collect data on competitors bird performance and give feedback. d) To arrange for transit insurance of parent chicks, settlement of insurance claims, if any. C) Laboratory analysis and testing services :- 1. Routine Diagnostic services :- a) Post Mortem Examination:- Postmortem examination is basic for diagnosis of disease. Based on the gross changes in organs, one can tentatively diagnose the disease condition. b) Prescription: Based on the post mortem examination, the prescription is to be given to the farmer which contains the medication prescribed, any vaccination if required and preventive guidelines. 2. Specialized laboratory examinations;- a) Histopathology. b) Bacterial Isolation. c) Antibiotic Sensitivity Test. d) Virus Isolation e) Serological Examination:- Various serological tests can be used to confirm presence of antigen or antibody in the sera such as Agar Gel Precipitation Test (AGPT), Haemaglutination inhibition test, ELISA test, Salmonella Plate Test, Mycoplasma Plate test. f) Polymerase Chain Reaction. g) Identification and characterization of Bacteria. h) Identification and characterization of Viru....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (Rate) dated 28.6.2017, which gives details of fully exempted services, the benefit of which is being claimed by the applicant, are as under :- Sr.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of services Rate Percent Condition 46 9983 Services by a veterinary clinic in relation to health care of animals or birds Nil Nil 54 Heading 9986 Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of- (a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing; (b) supply of farm labour; (c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market; (d) renting or leasing of agro machinery or vacant lan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es in order to identify defects. These tests are often conducted on site .; 7. Radiological inspection of welds This service code does not include: - damage assessment services, cf. 997162 - assessment of damages on behalf of insurance companies, cf. 9971620 - medical and dental analyses and testing services, cf. 99931 998352 Veterinary services for livestock This service code includes animal and veterinary hospital and non-hospital medical, surgical and dental services delivered to livestock. The services are aimed at curing, restoring and/or maintaining the health of the animal; hospital, laboratory and technical services for livestock; provision of dietary recommendations for livestock This service code does not include: - services related to animal husbandry such as artificial insemination, cf. 998612 998612 Animal husbandry services This service code includes sheep shearing and care and management of herds of farm animals; artificial insemination of farm animals; grading of eggs; cleaning of agricultural premises (hen houses, piggeries, etc.); accommodation services for pets (kennels); grooming and tattooing services for pets; training of pet animals; Far....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ood, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer, which does not alter its essential characteristics but makes it marketable for primary market. From a reading of the said definition, it can be said that the chicks in this case would not fall under the definition of an agricultural produce as it is not a produce out of rearing of livestock for the purpose of food, fibre, fuel, raw material or other similar product but are reared for sale to other poultry farmers, who will do the further rearing of these chicks for the purpose of food etc.,. In the instant case, we find that the services provided by the applicant in the form of services of selling and incidental services are akin to services provided by a commission agent. The word "Agent" has been defined under Section 2 (5) of the CGST Act, as a person including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent by whatever name called, who carries on the business of supply or receipt of goods or services on behalf of another. In the instant case, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g services as well as post mortem examinations by staff veterinarians and diagnostic services at Group companies' farms. 5.4.4 The core objective of rendering Veterinary services is to diagnose diseases conditions including post-mortem examination, monitor the flocks, clinical and subclinical infections followed by suggesting treatment and prescription. Doctor's role also includes visiting the problematic farms and collect the data regarding all aspects of rearing practices, collection of blood samples and organs from dead birds for testing for advising to the customers to correct the anomalies. 5.4.5 All the doctors are employee of the applicant and employed on payroll mainly from veterinary background (i.e. graduates in veterinary science) plus specialized in poultry microbiology/ husbandry (management)/ disease diagnosis. 5.4.6 The Applicant's veterinary services also include the following: (1) Individual programs of vaccination, preventative husbandry and veterinary field trial management. These are preferred to post outbreak intervention. Advice is also given on the refinement of operational hygiene standards. (2) In addition to veterinary referral and consultancy, tech....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es are therefore covered under the exemption provided by a veterinary clinic to livestock. Therefore, we find that the applicant is entitled to avail the benefit of Sr.No.46 of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017. 5.5 With regard to laboratory analysis and testing services, we find that the services provided by the applicant include conduct of post mortem examination for diagnosis of disease, histopathology, bacterial isolation, virus isolation, AGPT, Salmonella plate test, Identification of characterization of Bacteria, Identification and characterization of virus, analysis of feed and feed ingredients and water related tests. These are tests which are appropriately covered under services such as testing and analysis in related scientific fields such as microbiology, biochemistry, bacteriology, etc. Such type of testing services / laboratory services cannot be equated with the term 'agricultural extension' which covers application of scientific research and knowledge to agricultural practices through farmer education or training. The services provided by the applicant are more akin to technical testing and analysis services provided by them from their ....